Concern About Future NJ Revenue From Sin Taxes

Jul 23, 2018

New Jersey Statehouse

A non-profit organization cautions New Jersey officials not to rely on revenue from sports betting and the possible legalization of recreational pot to solve the state’s long-term budget problems.

New Jersey officials expect sports betting to bring in $13 million this fiscal year. Legalizing recreational marijuana could mean $300 million a year.

Mary Murphy with the Pew Charitable Trusts says other states that have legalized pot have seen an increase in revenues, but they are volatile.  

“How will those marijuana revenues continue to perform as more and more states legalize recreational marijuana? Will you see revenue decline as legalization becomes more prevalent? We simply don’t have the data to know that at this point.”

Murphy says New Jersey’s revenue from sports betting might also lag expectations if more states legalize it.

“If sports betting performs like traditional gambling, like casinos and racinos, state experiences have shown that there is a revenue bump in the beginning. But over time as you get more competition, as your neighboring states legalize, revenues erode.”

Though the state gets about 5 percent of its total revenue from taxes on gambling, alcohol, and tobacco, Murphy warns it’s hard to rely on that source of money for the future.

“There are plenty of appropriate one-time purposes that states can allocate these unpredictable revenue sources toward. It’s when the state is thinking about how to make sure that there are resources available for all those long-term needs in the state, are the appropriate revenues being generated in a reliable way?”